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Foreign Investment in India

Q.16: Are the investments and profits earned in India repatriable ? +

Answer: All foreign investments are repatriable (net of applicable taxes) except in cases where the investment is made or held on non-repatriation basis.

Indian Currency

B) Banknotes

8. What is non-sequential numbering? +

With a view to enhancing operational efficiency and cost effectiveness in banknote printing, non-sequential numbering was introduced in 2011 consistent with international best practices. Packets of banknotes with non-sequential numbering contain 100 notes which are not sequentially numbered.

Housing Loans

16. What are the minimum standards that banks are required to follow when they sell you a home loan? +

At the time of sourcing the loan, banks are required to provide information about the interest rate applicable, the fees / charges and any other matter which affects your interest and the same are usually furnished in the product brochure of the banks. Complete transparency is mandatory.
The banks will supply you authenticated copies of all the loan documents executed by you at their cost along with a copy each of all enclosures quoted in the loan document on request.

A bank cannot reject your loan application without furnishing valid reason(s) for the same.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to On Tap TLTRO/ reversal of TLTRO/ TLTRO 2.0 transactions

Q16: Whether banks need to first borrow from RBI under the on tap TLTRO scheme and then disburse under eligible assets or alternatively, can the banks first create eligible assets and then avail funds before 31 March 2021? +

Ans: Banks can use either of the alternatives. However, the request of the bank will be subject to availability of funds as on date of application i.e., funds cannot be guaranteed in case the total amount of ₹1,00,000 crore is already availed.

Government Securities Market in India – A Primer

16. How do the G-Sec transactions settle? +

Primary Market

16.1 Once the allotment process in the primary auction is finalized, the successful participants are advised of the consideration amounts that they need to pay to the Government on settlement day. The settlement cycle for auctions of all kind of G-Secs i.e. dated securities, T-Bills, CMBs or SDLs, is T+1, i.e. funds and securities are settled on next working day from the conclusion of the trade. On the settlement date, the fund accounts of the participants are debited by their respective consideration amounts and their securities accounts (SGL accounts) are credited with the amount of securities allotted to them.

Secondary Market

16.2 The transactions relating to G-Secs are settled through the member’s securities / current accounts maintained with the RBI. The securities and funds are settled on a net basis i.e. Delivery versus Payment System-III (DvP-III). CCIL guarantees settlement of trades on the settlement date by becoming a central counter-party (CCP) to every trade through the process of novation, i.e., it becomes seller to the buyer and buyer to the seller. 16.3 All outright secondary market transactions in G-Secs are settled on a T+1 basis. However, in case of repo transactions in G-Secs, the market participants have the choice of settling the first leg on either T+0 basis or T+1 basis as per their requirement. RBI vide FMRD.DIRD.05/14.03.007/2017-18 dated November 16, 2017 had permitted FPIs to settle OTC secondary market transactions in Government Securities either on T+1 or on T+2 basis and in such cases, It may be ensured that all trades are reported on the trade date itself.

FAQs on Non-Banking Financial Companies

Ceiling on deposits

16. Whether a company not complying with the prudential norms can raise public deposits ? +

A. A company not complying with prudential norms cannot accept public deposits.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q16. Is it required to submit any financial statements like balance sheet or P&L accounts (audited/ unaudited) along with the FLA return? +

Ans: No, balance sheet or profit and loss (P&L) accounts are not required to be submitted along with the FLA return.

Domestic Deposits

II. Deposits of Non-Residents Indians (NRIs)

16. Whether concessional rate of interest is applicable when loan against FCNR(B) deposit is repaid in foreign currency? +

Banks have freedom to fix the rate of interest chargeable on loans and advances against FCNR(B) deposits to the depositors without reference to their Benchmark Prime Lending Rate (BPLR) irrespective of whether repayment is made in Rupees or Foreign Currency.

Core Investment Companies

Core Investment Companies (CICs)

16. Whether CICs having asset size below Rs. 100 crore are regulated by the Reserve Bank? +

Ans: CICs having asset size of below Rs 100 crore are exempted from registration and regulation from the Reserve Bank, except if they wish to make overseas investments in the financial sector.

Coordinated Portfolio Investment Survey – India

Some important definitions and concepts

Q16. What are equity securities? +

Ans: Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity may be split into listed shares, unlisted shares, and other equity. Both listed and unlisted shares are equity securities. Equity securities are commonly called shares or stocks. Other equity is equity that is not in the form of securities.

Foreign Investment in India

Q.17: What is meant by investment on repatriation basis and investment on non-repatriation basis ? +

Answer: Investment on repatriation basis means an investment, the sale/ maturity proceeds of which are, net of taxes, eligible to be repatriated out of India. The expression investment on non-repatriation basis may be construed accordingly.

Core Investment Companies

Core Investment Companies (CICs)

17. As per the definition of CIC, only investment/loans/debt in group companies is eligible for computing 90% exposure? What treatment is to be given to company’s investment in group’s partnership concerns? +

Ans: CICs are prohibited from contributing capital to any partnership firm or to be partners in partnership firms including Limited Liability Partnerships (LLPs) or any association of person similar in nature to partnership firms.

Housing Loans

17. What do you do if you have a grievance? +

If you have a complaint against only scheduled bank on any of the above grounds, you can lodge a complaint with the bank concerned in writing in a specific complaint register provided at the branches as per the recommendation of the Goiporia Committee or on a sheet of paper. Ask for a receipt of your complaint. The details of the official receiving your complaint may be specifically sought. If the bank fails to respond within 30 days, you can lodge a complaint with the Banking Ombudsman. (Please note that complaints pending in any other judicial forum will not be entertained by the Banking Ombudsman). No fee is levied by the office of the Banking Ombudsman for resolving the customer’s complaint. A unique complaint identification number will be given to you for tracking purpose. (A list of the Banking Ombudsmen along with their contact details is provided on the RBI website).

Complaints are to be addressed to the Banking Ombudsman within whose jurisdiction the branch or office of the bank complained against is located. Complaints can be lodged simply by writing on a plain paper or online at www.bankingombudsman.rbi.org.in or by sending an email to the Banking Ombudsman. Complaint forms are available at all bank branches also.

Complaint can also be lodged by your authorised representative (other than a lawyer) or by a consumer association / forum acting on your behalf.

If you are not happy with the decision of the Banking Ombudsman, you can appeal to the Appellate Authority in the Reserve Bank of India.

Indian Currency

B) Banknotes

9. What is a "star series" banknote? +

Fresh banknotes issued by Reserve Bank of India till August 2006 were serially numbered. Each of these banknote bears a distinctive serial number along with a prefix consisting of numerals and letter/s. The banknotes are issued in packets containing 100 pieces.

The Bank adopted the "STAR series" numbering system for replacement of defectively printed banknote in a packet of 100 pieces of serially numbered banknotes. The Star series banknotes are exactly similar to the other banknotes, but have an additional character viz., a *(star) in the number panel in the space between the prefix.

Government Securities Market in India – A Primer

17. What is shut period? +

‘Shut period’ means the period for which the securities cannot be traded. During the period under shut, no trading of the security which is under shut is allowed. The main purpose of having a shut period is to facilitate finalizing of the payment of maturity redemption proceeds and to avoid any change in ownership of securities during this process. Currently, the shut period for the securities held in SGL accounts is one day.

FAQs on Non-Banking Financial Companies

Inter-corporate deposits (ICDs)

17. If a company being a shareholder of a public limited NBFC gives deposit or loan to the latter one, whether such a loan is to be treated as public deposit or ICD ? +

The objective of exempting the intercorporate deposits from the purview of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 is that the corporate bodies whether a shareholder or a non-shareholder should be able to appraise the loan proposals and ensure the safety of the funds lent. Hence, such loans will be treated as ICDs.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Procedure for submission of the FLA return

Q17. How should entities report FLA return to RBI? +

Ans: Entities can submit the FLA return through the online web-based portal Foreign Liabilities and Assets Information Reporting (FLAIR) system, having address https://flair.rbi.org.in/fla/faces/pages/login.xhtml.

To access the URL https://flair.rbi.org.in/fla/faces/pages/login.xhtml, any of the browsers viz, Internet Explorer, Google chrome, Firefox etc. can be used, as all of these would support this application.
The entity has to register on the portal by clicking Registration for New Entity Users.
The entity has to fill the details in the FLA user registration form, upload the documents mentioned (Verification Letter and Authority Letter) and click submit to complete the registration.
After successful registration, user id and default password will be sent to the authorized person’s mail id. Using this user id and password, entities can login to the FLAIR portal and file the FLA Return.

Please note: The excel-based format and email-based reporting system has been replaced by the web-based format for submission of annual FLA return from June 2019.

Domestic Deposits

II. Deposits of Non-Residents Indians (NRIs)

17. Whether banks can accept recurring deposits under FCNR(B) Scheme? +

No. Banks cannot accept recurring deposits under FCNR(B) Scheme.

Coordinated Portfolio Investment Survey – India

Some important definitions and concepts

Q17. What should be considered under equity securities? +

Ans: The following are included under equity securities:

Ordinary shares.
Stocks.
Participating preference shares.
Shares/units in mutual funds and investment trusts
Depository receipts (e.g., American Depository Receipts) denoting ownership of equity securities issued by non-residents.
Securities sold under repos or “lent” under securities lending arrangements.
Securities acquired under reverse repos or securities borrowing arrangements and subsequently sold to a third party should be reported as a negative holding.

Foreign Investment in India

Q.18: What are the guidelines on valuation of capital instruments ? +

Answer: Please refer to regulation 11 of FEMA 20(R).

Particulars	Listed Company	Un-Listed Company
Issue by an Indian company or transferred from a resident to non-resident - Price should not be less than	The price worked out in accordance with the relevant SEBI guidelines	The fair value worked out as per any internationally accepted pricing methodology for valuation on an arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant.
Transfer from a non-resident to resident - Price should not be more than	The price worked out in accordance with the relevant SEBI guidelines	The fair value as per any internationally accepted pricing methodology for valuation on an arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker.